Email this article to a friend

The Royal Bank of Scotland Group said today it has agreed to sell its RBS Hoare Govett corporate broking operations to US investment bank Jefferies Group.

Jefferies is paying a "nominal cash consideration" for the business and some 50 staff, the bulk from Hoare Govett and a few employees from the bank's cash equities--or research, sales and trading--business.

"This includes the advisory, sales, research and trading operations of the investment companies business," said Mark James, managing director of RBS global banking & markets.

"All the current investment companies team members, comprising 10 investment professionals, will be moving across to Jefferies and will be joining forces with their existing investment companies team," James said.

The deal was made possible, in part, by RBS agreeing to provide funding aid to Jefferies, according to a person familiar with the situation.

RBS said it will work closely with Jefferies and existing clients of the U.K. corporate broking business in seeking to transfer existing corporate broking roles to Jefferies to the satisfaction of its clients.

Jefferies's team is made up of five individuals covering primary and secondary sales, fund research and market-making, with a bias toward emerging and frontier markets.

The sale of Hoare Govett, which dates back to 1856, is part of a broader package of measures being taken by RBS to strip back its balance sheet and refocus its business.

Earlier this month, RBS, which is 83% owned by British taxpayers after a government bailout following the 2008 financial crisis, announced a broad-ranging restructuring that will see it prune about 3,500 jobs over a three-year period. RBS also said it would either sell or close unprofitable parts of its so-called global banking and markets - or investment banking - business, of which Hoare Govett is a part.

It is also selling or closing its cash equities, mergers and acquisitions advisory and equity capital markets businesses, focusing on its fixed income, foreign exchange, debt financing and transactions services businesses.

RBS said that it remains in active discussions with other third parties interested in acquiring various parts of the businesses it has identified for exit.

For Jefferies, the deal marks its first strategic move since the investment bank faced its own crisis in November amid questions about its European exposure and concerns over its reliance on short-term funding.

Since then, the firm's stock has rallied, climbing 60% from its lows after Jefferies addressed market rumors in a letter to clients, reduced its total balance sheet by nearly one-fourth and decreased its leverage.

Jefferies, which was one of the most aggressive banks in recruiting professionals from bulge-bracket firms since the financial crisis, has been beefing up its investment banking operations over the past three years, adding Benjamin Lorello from UBS in 2009 to help lead an expansion of the business.

The firm reported 3,898 employees at November 30, up 27% from a year ago, and has been strategically hiring in Europe and Asia as it seeks to build out its international presence.